Code of Practice for Revenue Audit and other Compliance ... · PDF fileTax and Duty Manual...

Tax and Duty Manual Code of Practice for Revenue Audit and other Compliance Interventions

Code of Practice for Revenue Audit and other Compliance Interventions

This document should be read in conjunction with the Code of Practice for Revenue Audit and other Compliance Interventions

Document reviewed January 2018


Code of Practice for Revenue Audit and other Compliance Interventions has now been updated and is available on the Revenue website under Tax Practitioners, Codes of Practice. It is effective from 22 February 2017 as regards all compliance interventions that are notified on or after that day.

As regards compliance interventions, notice of which had been given, but which had not been settled before 22 February 2017, the taxpayer may choose whether the settlement is made under the terms of this Code of Practice or the Code of Practice for Revenue Audit and other Compliance Interventions published on 20th November 2015.

The Code has been revised to reflect changes arising from Section 56 Finance Act 2016. This introduced an amendment to Section 1077E whereby taxpayers with tax liabilities in respect of offshore income, gains or assets will not be able to make a qualifying disclosure after 30th April 2017. This restriction on the right to make a qualifying disclosure will also apply where there are liabilities arising within the State and other liabilities relating to offshore matters except where the penalty arising on these offshore matters does not exceed 15%.

Revenue has agreements with over 100 jurisdictions to automatically exchange bank and other financial account information with regard to persons who are not resident in their country. Information has already been received for the year 2014 from 26 EU Member States. In September 2016, Revenue received information relating to 2014 and 2015 accounts from the US Internal Revenue Service under Foreign Account Tax Compliance Act (FATCA). Information in relation to 2016 accounts from 54 other jurisdictions will be received during 2017 with data from a further 47 jurisdictions due to be received in 2018. This information will be received under the Common Reporting Standard (CRS).

https://www.revenue.ie/en/self-assessment-and-self-employment/documents/code-of-practice-revenue-audit.pdf





















The information provided under both FATCA and CRS includes:

Name, address, tax identification number and account number of each account holder that is a resident of Ireland.

Name and identifying number of the financial institution,

The gross amount of interest paid on a deposit account,

The gross amount of dividends paid or credited to the account,

The gross amount of income including interest or dividends paid into the account,

The gross proceeds from the sale or redemption of financial assets held on account,

The account balance or value at the reporting date, and

Where a reportable account has been closed during the period, the closure date of the account.

This information will be used in Revenue’s risk analysis tools to target appropriate cases for intervention.

There are a number of other changes to the Code of Practice for Revenue Audit and other Compliance Interventions which include:-

Allowing the benefit of an unprompted qualifying disclosure where related liabilities arise for taxes or periods that are not within the scope of the audit. Previously only a prompted disclosure was allowed.

The period to prepare a qualifying disclosure remains at 60 days however only one period of 60 days will be allowed for the same issue or period.

A full list of the amendments is included in the Appendix attached.


Appendix I

Text Page

1.12 Operation of this Code of Practice

The effective date has changed from 20th November 2015 to 22 February 2017.

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1.5 Selection of Taxpayers for Compliance Intervention

Following sentence has been changed from originalCases are selected in a number of ways, including: REAP (Revenue’s electronic risk analysis system a range of anomaly-detection and predictive models, including real-time risk models for VAT and PAYE; by teams tackling aggressive tax and duty avoidance schemes; and through Joint Investigation Units, where Revenue works closely with other Government Departments and where there is increased use of shared facilities for data exchange.

13

1.5.1 Risk Evaluation Analysis and Profiling – REAP and CRISP Following sentence has been changed from original

Revenue’s Customs Risk Intervention Selection Programme – CRISP assists in the selection of imports and declarants for a post clearance intervention, and provides a risk based approach to the selection of customs declarations for interventions.

14

1.8 Compliance with Union Customs Code and Delegated & Implementing Acts Heading above has been changed and following sentence has been changed from original

Revenue has robust checking procedures in place in order to satisfy EU obligations and ensure compliance with the requirements of the Customs Code and its associated Implementing Provisions.

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1.9 Electronic Support Tools and TechniquesFollowing two paragraphs have been changed from original

17


The terms ‘e-Audit’ and ‘e-Auditing’ are used to describe the use of computer programmes in the interrogation of records and data stored on electronic systems in the course of a Revenue Audit or other compliance intervention. There is no distinction between records kept in a traditional manner and records kept using one or more of the many electronic systems available commercially

The potential use of extensive e-auditing techniques will be noted in all compliance intervention notification letters. Some standard electronic checks are part of most interventions and these do not require advance notification in the same way.1.9.1 Pre-Audit Preliminary Meeting – Electronic RecordsFollowing sentence has been changed from originalThe taxpayer will be asked to generate reports, and provide data files from the systems in use. A full back- up of the system’s data files may also be requested. The Revenue File Transfer Service (RFTS) is a secure facility that can be used to securely exchange data with Revenue personnel and is the preferred method of transferring data. The use of Revenue encrypted storage devices can also be used where necessary. Electronic and paper records provided in the course of compliance interventions are subject to Revenue data protection policy and data protection legislation.

17

3. REGULARISING TAX AND DUTY DEFAULTS

Final sentence has been added to the following paragraph.

The opportunities outlined in this chapter for regularising tax and duty defaults are generally available to taxpayers irrespective of the type of compliance intervention undertaken by Revenue. There are some conditions, exceptions and exclusions but these are outlined at the relevant paragraph. In particular, where a ‘Revenue Investigation’ has started, the taxpayer is excluded by tax legislation from making a ‘qualifying disclosure’ regarding the matter under investigation. Likewise, with effect from 1st May 2017 this exclusion applies to any liabilities included in a disclosure that relate directly or indirectly to offshore matters.

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3.2 Self-Correction without Penalty

The following paragraph has been changed from original.

For Stamp Duty (excluding levies), the self-correction must take place within twelve months of the ‘specified return date’, as defined in section 14A(1) Stamp Duties Consolidation Act, 1999. In the case of the various stamp duty levies (Part 9 Stamp Duties Consolidation Act 1999), self-correction must take place within twelve months of the due date for the submission of the statement for the period in question.

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3.5.3 No Loss of RevenueFollowing sentence has been changed from original

A Tax Clearance Certificate is confirmation from Revenue that a person’s tax affairs are in order at the date of issue of the Certificate. It will not, of itself, be accepted as proof of ‘no loss of revenue’ in relation to any specific transaction.

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Changes has been made to Related and Unrelated liabilities. With effect from 22 February 2017 an unprompted qualifying disclosure may be made for liabilities arising outside an audit period for defaults that are not in the deliberate behaviour category.

3.7.1 Liabilities not within initial scope of the Revenue Audit

In cases not involving deliberate default, if Revenue draws the attention of the taxpayer to issues not within the initial scope of the Revenue Audit, without formally extending the audit, the taxpayer will have the benefit of an ‘unprompted qualifying disclosure’ in respect of any liabilities disclosed.

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3.10 Exclusions – Disclosure not regarded as a Qualifying Disclosure

Following paragraph has been changed from original to take account of the new restrictions to disclosures

40


relating to offshore matters introduced in the Finance Act 2016.

A taxpayer is entitled to make a disclosure of additional undeclared tax or duty liabilities or other errors made in a return/self-assessment to Revenue at any time. This Chapter outlines the opportunities and methods available to a taxpayer to regularise his or her tax or duty affairs. However, any disclosure made by a taxpayer is excluded by legislation from being regarded as a ‘qualifying disclosure’ in the following circumstances:-

1. where a ‘Revenue Investigation’ has already started or where any of the following circumstances apply:

a) If before the disclosure is made, Revenue had started an investigation into any matter contained in that disclosure and had contacted or notified that person, or a person representing that person, in this regard

b) If matters contained in the disclosure are matters -

(i) that have become known, or are about to become known, to Revenue through their own investigations or through an investigation conducted by a statutory body or agency

(ii) that are within the scope of an inquiry being carried out wholly or partly in public, or

(iii) to which the person who made the disclosure is linked, or about to be linked, publicly.

2. where any disclosure made after 30th April 2017 includes matters that relate directly or indirectly to any of the following:

a) an account held or situated in a country or territory other than the State

b) income or gains arising from a source, or accruing, in a country or territory other than the State

c) property situated in a country or territory other than the State.

A disclosure in respect of liabilities arising in the State will not be accepted as qualifying if there are other offshore


matters of which Revenue is or becomes aware which give rise to a penalty greater than 15%.

3.13 Period to prepare a Qualifying Disclosure

New paragraph inserted as the final paragraph to 3.13.

Notice of Intention in respect of the same issue or period

A notice of intention to make a qualifying disclosure will not be granted where the taxpayer has already availed of a 60 day period in respect of the same issue or period, i.e. only one 60 day period will be allowed to prepare a qualifying disclosure for the same issue or period.

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4.1 Location of Audit and Expected AttendeesFollowing sentence has been changed from originalWhere the compliance intervention scheduled includes the use of e-audit techniques, as noted in paragraph 1.9 Electronic Support Tools & Techniques, the taxpayer’s technology expert or software/EPOS supplier may also need to attend.

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4.6 Auditing Earlier Years, Later Years, Periods or IssuesFollowing paragraph has been changed from original to amend reference from Customs Code to Union Customs CodeGenerally, audits involving Customs duties will not extend beyond 3 years. This is because a debt shall not be notified to a debtor after a period of 3 years has passed from the date on which the Customs debt was incurred. [Article 103 (1) of the Union Customs Code & Article 221 (3) of the Customs Code]

The period for notifying a Customs debt to a debtor may be extended beyond 3 years where the act which gave rise to the debt, at the time it was committed, was likely to give rise to criminal court proceedings. [Article 103(2) of the Union Customs Code]

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New paragraph 4.10 inserted. 55


4.10 Data Retention PolicyAs noted in Chapter 2, Revenue Audit and intervention programmes are mainly concerned with detecting and deterring non-compliance. While this may involve the examination of original records, the removal of such records, both paper and/or electronic, occurs infrequently. The retention period of these original records is finite and is governed by section 905(2)(iv) (D) TCA 1997.

Revenue Compliance Interventions can involve the copying of records or the extraction from records. Typically, this can include any one or more of the following:

copies of “raw data” in a database, involving the underlying transactions, e.g. individual line level transactions in an EPOS system

reports from systems, e.g. reports of sales, purchases, payments, bank etc.

reports from non financial business records such as tachograph records, stock control, and manufacturing processes.

The data will be deleted within six months of the date that the compliance intervention is finalised. Where the data forms part of a quality control review of the intervention, or a Revenue Internal Audit or other similar activity, it will be deleted when this process is completed. Files which contain the results of the tests carried out during the intervention testing and other relevant files will be retained for the purposes of any internal or external review or to inform a subsequent intervention. 5.3 InterestCustomsFollowing sentence has been changed from original

Interest charges will be applied in accordance with Article 114 of the Union Customs Code & Article 232 of the Community Customs Code [Council Regulation (EEC) No 2913/92].

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Following heading and paragraph has been changed from original5.4.3 Section 14A Stamp Duties Consolidation Act 1999

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Section 14A of the Stamp Duties Consolidation Act 1999 provides for the addition of a surcharge to the stamp duty payable on an instrument where an accountable person fails to cause the delivery of a stamp duty return on or before the specified return date. 5.5 Penalties

Following paragraphs have been changed from originalThere are no provisions for tax-geared penalties in relation to Customs defaults. Fixed administrative penalties for contravention of the Union Customs Code and its Delegated & Implementing Acts apply under Section 40 of the Customs Act 2015.

Fixed administrative penalties for contravention of the Community Customs Code and its Implementing Provisions apply under Section 54 of the Finance Act 2011 (see paragraph5.7 of this Code of Practice).

In Stamp Duty cases, for instruments executed on or after 7 July 2012, where an instrument is submitted for stamping (by way of filing a Stamp Duty return) after the time allowed, taxpayers are liable to pay interest on late payment where the unpaid duty exceeds €30, and a surcharge under Sections 14 and 14A, respectively, of the Stamp Duties Consolidation Act, 1999.

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5.5.1 Calculating the ‘difference’ for tax & duty-geared penalty purposesFollowing paragraph has been changed to take account of tax geared penalties applying to refunds.

Liability to a tax-geared percentage penalty generally arises on the ‘difference’ between the amount of tax that would have been payable, or could have been claimed, if the tax had been computed in accordance with the incorrect or false return or claim, and the amount of tax that would have been payable or refundable if the tax was computed in accordance with the true and correct return or claim. [Section 1077E (11) TCA 1997]

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5.6.2 Penalty Table 1 – Penalty Percentages (on or after 24/12/2008)

Following paragraph has been changed to take account of tax geared penalties applying to refunds. Also reference to Stamp Duties Consolidation Act 1999 is new.Liability to a tax-geared percentage penalty arises on the ‘difference’ between the amount of tax that would have been payable or could have been claimed if the tax had been computed in accordance with

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the incorrect or false return/claim, and the amount of tax that would have been payable/refundable if the tax was computed in accordance with the true and correct return or claim [s1077E TCA 1997].

Section 134A Stamp Duties Consolidation Act 1999 provides for tax-geared and/or fixed penalty of €1,265 for stamp duty defaults.

5.7 Fixed Penalties

New paragraph inserted

Infringements of Union Customs Code

Section 40 of the Customs Act 2015 provides for the application of administrative penalties for infringements of the Union Customs Code and its Delegated and Implementing Acts and are effective from 31 December 2016.

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5.7 Fixed Penalties

New paragraph inserted

Stamp DutySections 8A and 8B Stamp Duties Consolidation Act 1999 provide for fixed penalties of €3,000 for failure to deliver a correct return or failure to deliver a return.

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5.9 Payment

New sentence inserted

In the case of stamp duty, the instrument will remain unstamped until all the liabilities, including the full amount of duty chargeable, are paid.

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5.10 Inability to Pay ClaimsCustoms

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Following sentence has been changed from original

Article 112 of the Union Customs Code (952/13) provides for the granting of payment facilities in the form of payment by instalments. 5.11.2 Appeals Procedures

Following paragraph has been changed from original

A taxpayer is entitled to lodge an appeal against Revenue’s findings in relation to the income and gains to be assessed in a revised assessment or tax estimate. An appeal can also be made against a stamp duty assessment.

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6.2 Exclusions from PublicationFollowing paragraph has been changed from original to take account new limits introduced in FA 2016Statutory ExclusionsSection 1086 TCA 1997 provides for the following statutory exclusions from publication – Revenue does not publish the following cases;

•cases where a qualifying disclosure is accepted; [Section 1086 (4)(a) TCA 1997]•cases where the specified sum referred to in paragraph (c) or (d) of Section 1086 subsection (2) does not exceed €35,000 (€33,000 in respect of liabilities arising between 1 January 2010 and 1 January 2017) (figure for tax, interest and penalty) [Section 1086 (4)(c) TCA 1997]

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8.4.2 Transactions commenced after 23 October 2014Following sentence has been changed from original● a ‘tax avoidance surcharge’ of up to 30% may apply but this can be reduced where a ‘qualifying avoidance disclosure’ is made within a certain timeframe (see paragraph 8.6.3) or in certain circumstances where a valid protective notification is submitted (see paragraph 8.5).

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8.6 Qualifying Avoidance DisclosureFollowing sentence has been inserted as third paragraph in 8.6

A taxpayer can make a ‘qualifying avoidance disclosure’ prior to a Revenue challenge or the commencement

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of a Revenue Audit or Revenue Investigation and can benefit from a greater level of reduction of their tax avoidance surcharge if they do so.

8.7.3 Conditions for a Taxpayer Initiated DisclosureFollowing sentence has been changed from original

(iii) The taxpayer, in making the ‘qualifying avoidance disclosure’ or protective notification, submits a completed mandatory disclosure form (Form MD7) to Revenue prior to the return filing deadline for the chargeable period in which the transaction was undertaken.

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8.12 Surcharge for Late Filing of ReturnFollowing paragraphs have been changed from original

Taxpayers are liable to a late filing surcharge, under the provision of Section 1084 TCA 1997, for the late filing of a return. The late filing surcharge applicable will always be added to an audit or intervention settlement where an income tax, capital gains tax, corporation tax, capital acquisitions tax (Section 53A Capital Acquisitions Tax Act 2003) return was not filed on or before the specified return date. Section 14A of the Stamp Duties Consolidation Act 1999 provides for the addition of a surcharge to the stamp duty payable on an instrument where an accountable person fails to cause the delivery of a stamp duty return on or before the specified return date.

Section 1084 TCA 1997 also provides that the filing, on time, of an incorrect return, either deliberately or carelessly, is deemed to be late filing. Section 14A of the Stamp Duties Consolidation Act 1999 includes a similar provision. However, a late filing surcharge will not be sought where the return was filed on or before the specified return due date and either a ‘tax geared penalty’ or a ‘tax avoidance surcharge’ was applied to a settlement.

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Appendix IIFollowing sentence has been changed from original with insertion of Stamp Duty (SD)*‘Self–Correction without Penalty’ for Income Tax (IT), Corporation Tax (CT) Capital Gains Tax (CGT),

Local Property Tax (LPT), Stamp Duty (SD) and Capital Acquisitions Tax (CAT)

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Appendix II

Following table has been changed from original. Aspect Queries moved to second lineNotification of intervention Disclosure that may be availableAssurance checks Unprompted qualifying disclosureAspect Queries and Profile Interviews Unprompted qualifying disclosureAudit Prompted qualifying disclosureInvestigation Benefits of a qualifying disclosure not available

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Appendix IIIFollowing bullets have been changed from original. Second bullet is new

• Sections 8(4A), 8A, 8B, and 134A Stamp Duties Consolidation Act 1999 – Stamp Duties – Penalties

• Section 40 Customs Act 2015 – Administrative Penalties for contravention of Customs Acts (with effect from 31/12/2016)

• Section 54 Finance Act 2011 – Customs Administrative Penalties (with effect until 30/4/2016)

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Appendix IIINew bullet

• Section 40 Customs Act 2015 – Administrative penalties for contravention of the Customs Acts

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Appendix VFollowing sentence has been changed from original

For Customs: the obligation to keep records is laid down in Article 51 of the Union Customs Code, Article 14 and Article 16 of the Community Customs Code [Council Regulation (EEC) No 2913/92

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